When you are the lessee, you may want to make sure you can sublease extra space you have. The lease should contain provisions addressing whether you can sublease, whether you have to get landlord approval for a sublease, and other relevant terms.
Many times, a commercial lease will require that the lessee require the sublease to incorporate the lease terms and conditions. Sometimes, the landlord will require that the sublessee go through a process for approval as a sublessee such as submitting financial information to the landlord as a part of the landlord’s approval process of any sublease. Another issue that can be important to realize is that the generally, a landlord does not want to lease space wholesale so that lessee’s are able to make money off the leased space which the landlord might otherwise be able to earn directly if they leased the space to the sublessee. Accordingly, a landlord’s lease may require that any extra rent paid by a sublessee, above and beyond what the lessee has to pay for the space, be paid by the lessee to the landlord.
What is important to remember, no matter the sublease terms, is that the lessee will remain subject to the lease regardless of what the sublease says. The sublease does not modify the lease. In short, a lessee needs to make sure that the sublease is sustainable, does not violate the lease, and is financially beneficial to the lessee. For example, the lessee should make sure the sublease term is equal to, or shorter than, the lease because they cannot make any promises to use space they do not have a right to use.
If you are a sublessee, you need to make sure that you get a copy of the lease. The sublessee must realize that the lease is the document that creates the context within which the sublease will operate. The sublease is going to be dependent on the relationship between the landlord and tenant. Usually, a sophisticated lessee will put in the sublease that that sublessee is obligated to follow the terms and conditions of the lease. But even if it does not, violations of the lease by the sublessee can create significant problems, both for the lessee and the sublessee. The sublessee may have some rights against the lessee if it is the lessee’s fault, but regardless, the sublessee may still be kicked out of the space they were depending upon.
Remember that other terms of the lease may also come into play. For example, the management costs of the landlord may be passed on to the lessee. A question to consider is how the lessee should, if they can, pass a proportional share on to the sublessee.
If the Landlord must approve the sublease, look out for terms that may require the lessee to reimburse the landlord for such costs.
Finally, when a lessee is interested in subleasing, the lessee may be in competition with the landlord who is leasing other space in the facility. The lease may have terms that prohibit, or limit, the ability of the tenant to advertise the space. The lease may also require the tenant to sublease space at less than the amount the landlord is leasing space.